- Competitive advantage
Productivity Advantage.
All costs decline at a given rate as volume increases
All costs decline at a given rate as volume increases
Value Advantage.
The strategic challenge to logistics is to seek out strategies that will take the business away from the commodity end of the market towards a securer position of strength based upon differentiation and cost advantage.
Cost leaderships can be gained through SCM or volume and they should be gained early in the market life cycle for better market share.
Customer relationships can be a way to differentiate because customers in all industries are seeking greater responsiveness and reliability from suppliers: delivery service, after-sales service, financial packages, technical support Etc
Segmenting the market to create differentiated appeals for a specific segment and adding value through differentiation is a powerful means of achieving a defensible advantage in the market
Product differences and brand name are not longer are enough to get a competitive advantage
- Gaining competitive advantage through logistics
Competitive advantage is gained by performing more efficiently in the value chain processes or performing them in a unique way that creates a greater differentiation.
In logistics the goal is to link the marketplace, the distribution network, the manufacturing process ad the procurement activity in such a way that customers are services at higher levels and yet at lower costs.
- The mission of logistics management
A “One plan” mentality that replaces the conventional stand-alone and separate plans of marketing, distribution, production and procurement.
A planning concept that seeks to create a framework through which the needs of the marketplace can be translated into a manufacturing strategy and plan, which in turn links into a strategy and plan for procurement.
- The supply chain and competitive performance
-The supply chain is the network of organizations that are involved, through upstream and downstream linkages, in the differentiated processes and activities that produce value in the form of products and services in the hands of the ultimate consumer.
-Vertical integration normally implies ownership of upstream suppliers and downstream customers
-Companies cannot profit at the expense of their supply chain partners because cost finally have to be paid by the customers
-Logistics is essentially a planning orientation and framework that seeks to create a single plan for the flow of product and information through a business.
-Supply Chain management builds upon this framework and seek to achieve linkage and co-ordination between processes of other entities in the pipeline, i.e. suppliers and customers, and the organization itself.
-The focus of supply chain management is on co-operation and trust and the recognition that properly managed ‘the whole can be greater than the sum of its parts’.
-SCM is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost t the supply chain as a whole.
-Supply chain is a network of connected and interdependent organizations mutually and co-operative working together to control, manage and improve the flow of materials and information from suppliers to end users.
- The changing logistics environment
a)The customer service explosion
Customer service can be defined as the consistent provision of time and place utility because products don’t have value until they are in the hands of the customer at the time and place required.
Competitive advantage through service comes from a combination of a carefully thought out strategy for service, the development of appropriate delivery systems and commitment from people, from the Chief Executive down.
b)Time compression
Shorter order cycles to convert quickly and order into cash.
To provide a timely response to volatile demand
c)Globalization of industry
Most markets will be dominated by global companies, the only role left for national companies will be to cater for specific and unique local demands.
d)Organizational integration
It is difficult to achieve a closely integrate, customer-focused materials flow while the traditional territorial boundaries are guarded by management with its outmoded priorities.
e)The new rules of competition
Nowadays instead of isolated competition between firms there is a supply chain competition
Companies compete through their capabilities and competences (Core processes)
With shorter life cycles inbound and outbound logistics are fundamental to success
Commoditization of markets makes product availability a major determinant of demand (customers choose from a portfolio of brands)
There is a trend for customers to reduce their supplier base
New competitive model include process innovation and product innovation. Competitive Advantage = Product excellence X process excellence
The management of lead times is the key to success in managing logistics operations.
Shorter lifee cycles demand shorter lead times. Some product life cycle is shorter than the strategic lead time (the time needed to designed it, make it and sell it)
Lead time traditionally is defined as the elapsed period from receipt of customer order to delivery. Today, lead time is the time taken from the drawing board, through procurement, manufacture and assembly to the end market.
Basis for successful logistics and supply chain:
- Responsiveness
Customers want shorter lead times, flexibility, and solutions to their problems.
Agility is the ability to move quickly and to meet customer demand sooner.
Agility through the supply chain can transform organizations to be demand driven instead of forecast driven
- Reliability
A key to improving reliability in logistics is enhanced pipeline visibility. End-to-end visibility improves reliability of responses
- Relationships
The relationships between buyer and suppliers should bee based upon partnerships,
Successful supply chain will be those which are governed by a constant search for win-win solutions based upon mutuality and trust.
